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This article appears in the April 2, 2009, edition of ISO&Agent Weekly.
Many merchants are confused by credit card processing rates and fees, and increasingly they are turning to the Internet for information, according to industry insiders.
Rather than let merchants take their chances with Google searches for "merchant processing" or "processing fees," some companies have developed online comparison-shopping services that allow merchants to view and choose from multiple service providers' offers.
Merchants that seek processing information using general Web searches may not find accurate information, note industry insiders. The third-party Web sites are intended to provide accurate information to merchants without sales pressure.
ISOs that register with the sites can use them to find merchant clients that are interested in finding merchant-service providers.
"A merchant can type the term 'merchant account' into any search engine, and they'll get 1 million results comprised of companies trying to sell them something," says Ben Dwyer, founder and managing member of East Berlin, Conn.-based CardFellow.com. By using a Web site such as CardFellow.com, which helps service providers find and communicate with potential merchant clients via an online forum, merchants can receive help and education from a neutral third-party that can "provide unbiased information," he says. CardFellow launched in January.
Merchants can register with CardFellow and receive quote offers from multiple service providers that have registered with the site, says Dwyer. CardFellow reserves the right to terminate a provider account if the company behaves inappropriately, such as trying to make a merchant pay a rate higher than the rate the companies negotiated using the site, says Dwyer, adding that CardFellow has not yet terminated a provider account.
Another company, Transparent Financial, offers an online credit card processing calculator tool that merchants can use to audit their processing fees and an online comparison-shopping service that enables merchants to see quotes from multiple providers, says Sean Harper, CEO of Transparent Financial Services LLC, a Chicago-based provider of financial service comparison-shopping services.
The calculator compares the merchant's rates with those of comparable businesses, provides an explanation of fees and recommends how to reduce rates, Harper says. Transparent Financial determines the comparable rates using a combination of interchange data from MasterCard Worldwide and Visa Inc. and fee data from other site users.
"Merchants have been asking for this," Harper says. "Of all the financial services, the most they are confused by is card processing."
Merchants Want Reassurance
The industry "has gotten a negative image from people who have done some things that are not in the best interest of all parties," says Cheryl Bousquet, a consultant with Central Payment Corp., a Larkspur, Calif.-based ISO.
Third-party Web sites that bring merchants and service providers together will "do well" once merchants understand they can use the sites to gather more information about services, she says.
Using a third-party comparison site may ease some merchant concerns about their processing costs, observers say.
"What happens is merchants just feel like they need to be reassured" that their merchant-account rates are reasonable, Adil Moussa, an analyst with Aite Group, a Boston-based consultancy.
Merchants can gain someinformation about processing and fees from talking with their merchant-service providers, "but then [the merchants] just have to rely on the merchant provider's word that this is it," says Moussa. "Going to [third-party Web sites] gives peace of mind by allowing them to compare what they have."
Online Comparison Tools
As the merchant need for more Internet-based payment-processing information has grown, so have the number of third-party companies that offer online information and communication tools.
In addition to its online processing-calculator tool, Transparent Financial also offers an online site that merchants can use to find ISOs and processors. When using the site, merchants enter their business information, such as business type, monthly transaction volume and average transaction size, and Transparent Financial "matches them up with ISOs who want to be matched with merchants" matching their criteria, says Harper. "Merchants can browse the list and be introduced to as many or as few providers as they like," he says.
Transparent Financial released an updated version of its comparison service in August, and it launched an early version of the calculator tool in November.
ISOs that sign a merchant contract using Transparent Financial's service pay a percent of their residuals to Transparent Financial, says Harper, who declined to share the specific amount.
With CardFellow, a merchant can register with the site and create a business profile that includes the current transaction rates it is paying, the type of business and its credit standing, says Dwyer. The CardFellow system sends the merchant profiles to merchant-service providers that have registered with the site, he says.
The service providers can review the merchants and choose to send them service quotes. A merchant interested in a quote or service provider can communicate with the provider via an online message board monitored by CardFellow, Dwyer says.
The service is free for merchants. Providers register for free but must pay a fee to send a quote to a merchant, says Dwyer. A provider will pay between $7 and $8 to send a quote to an established, high-volume merchant, while a newly established merchant may cost $3 or $4, says Dwyer. CardFellow does not get a portion of the provider's residual or income from any agreements signed using the site.
